Social investment fund backs the arts

A new funding model aimed at bringing fresh investment from the public, private and charitable sectors into the arts is being established through a £7m investment fund that will provide unsecured loan finance to arts organisations that can demonstrate social impact. Convened with the help of the Cabinet Office, the Arts Impact Fund has been created by a group of investors who share a commitment to the arts: Bank of America Merrill Lynch, Esmée Fairbairn Foundation and Nesta, supported by Arts Council England and with additional funding from Calouste Gulbenkian Foundation.

The Fund will offer arts organisations an alternative to commercial loans and grant funding, and is expected to bring significant benefits to some, enabling them to work with experienced arts investors, sharing risk, securing finance for core costs and accelerating their development plans. Those who apply will have to show why they need the money and explain the social impact that the investment will make in any of three contexts: youth and educational attainment; community and citizens; and health and wellbeing. They will also have to demonstrate how they will repay the loan.

As well as distributing funds, this ground-breaking “demonstration” project will be used to evaluate the potential for social finance in the wider arts sector. It will contribute to the debate on how best to track and report on artistic and social outcomes; establish levels of demand for social impact funding in the sector; demonstrate how arts organisations can generate both financial and social returns; and establish predictions for loss/default rates and returns, to allow for a larger follow-on fund. Case studies will be produced to widen understanding of how arts organisations can improve their resilience through social investment.

The Arts Impact Fund will be open for online applications from 15th April for unsecured loans ranging from £150k to £600k, with an interest rate of between 4 and 7%. Successful applicants will be announced every six months over a two year period with their performance and social impact measurements published.

Rob Wilson MP, the Minister for Civil Society, said: “As part of this Government’s long term plan for the economy, social investment plays an important role by unlocking finance to help charities and social enterprises do more. We believe that the Arts Impact Fund and this pioneering new model is just the start and we want to see it scaled up and replicated in other sectors to address a range of social challenges.” Helen Goulden, Executive Director of Nesta, commented: “These first two years will be critical to understanding the long-term potential of impact funds of this kind to support the arts.”